Assignment Instructions: After reading the IMAA article this week on Effective Management of Change during Mergers and Acquisition, review the case study noted within the article on item 7. It is a
7. Case Study 2: AOL and Time Warner Merger
When the merger took place in 2001, it was hailed as a triumph. But it didn’t go as per expected lines. AOL seemed like the answer to Time Warner digital business. Both the companies lost revenue and split in 2009. Few of the reasons are mentioned below:-
The leaders of the both the organization Steve Case (AOL) and Jerry Levin (Time Warner) couldn’t able to motivate and energize the employees and both of them seemed to lack the vision.
Structural Incongruities: AOL employees never exhibited the attributes of a typical Warner company and thus making it difficult to establish a single cohesive unit and foster collaboration.
Existence of disparate culture played a major role in the failure of merger.
The challenge before both the companies was to bridge corporate culture differences. It was required that the leaders of both the organization create proper vision and integration plan and make the employees accept the new reality of the business. They were no proper communication from the senior executives. Leaders couldn’t able to energize and motivate employees. In the absence of this, there was chaos in both the organisation and the employees were not sure as to which culture should they adopt and continue with. The AOL was centrally managed while Time Warner was more or less decentralised where manager has the decision making power. There was remarkable difference in the official dress code for the both the firms and there was no proper understanding among the employees as to what would be the formal dress code after the merger. All these factor lead to a situation where one can say that there was lack to manage the change.
In a poll conducted on LinkedIn, it has been found that 80% of mergers fail because of inability of the merged unit to generate synergies. Both the organization employees should have demonstrated respect for each other culture; this would have encouraged collaboration. We can conclude that it was basically companies’ inability to handle change in an effective way that led to their downfall.
